How to Increase Customer LTV With a Loyalty Program

April 8, 2020

When brands evaluate their business success, they look at metrics like net promoter score, customer satisfaction and customer effort score. But perhaps one of the most important metrics these days is customer lifetime value (LTV), which highlights the strength of the customer experience.

What Is Customer Lifetime Value

Customer LTV is an estimate of the net profit attributed to the overall future interactions with a customer. Understanding LTV has become critical as brands shift from a more near-time focus on quarterly profits to one that puts greater emphasis on the long-term relationships they build with their customers. This isn't a new concept, Forrester noted in a recent report, "but it’s gaining traction as customer insights professionals seek to maximize efficiency, demonstrate economic value and leverage advances in data management for strategic purposes like customer experience improvement."

Given these statistics, more brands now understand that taking a customer-centric approach is the key to success in today’s marketplace. Consumers look to their favorite brands for offers and rewards that appeal uniquely to them. And the brands that can successfully deliver personalized offers establish a stronger, more valuable bond that translates into greater loyalty and LTV.

Loyalty programs are an important component in becoming more customer-centric because:

83% of consumers say they are more likely to continue doing business with certain brands as a result of loyalty programs; and

76% consumers say loyalty programs are part of their relationship with brands.

Personalization and Customer Lifetime Value

Loyalty programs offer a conduit through which you can collect data about individual customers – from purchasing patterns and product and service preferences to the drivers and incentives that encourage customers to change their behaviors. From this data, you can gain valuable new insights that enable you to create unique offers for each customer.

While some brands claim they personalize offers, they really are only breaking their customer base down into microsegments based on a larger number of commonalities. This does not go far enough, though, in engaging customers on an individual level, which is required to take customer loyalty programs to the next level. Ultimately you must strive for true 1:1 personalization, combining customer, transaction and third-party data to help more deeply and completely understand the desires and motivations of each individual.

Given changing customer expectations, it’s now time to shift your focus from a product-centric approach to one that addresses the entire customer journey. True 1:1 personalization enables you to deliver offers that optimize relevance and impact, that are timely and tailored to the individual, and that yield the best customer journey and experience. By increasing engagement and loyalty, you will be well on your way to maximizing customer LTV.